Ford Motor Company is discussing new ways to recapitalize the firm and raise additional capital Its current capital structure has a 25% weight in equity, 10% in preferred stock, and 65% in debt. The cost of equity capital is 14%, the cost of preferred stock is 8%, and the pretax cost of debt is 7%. What is the weighted average cost of capital for Ford if its marginal tax rate is 35%? A. 7.26% B. 6.89% C. 7.98% D. 8.35%

Ford Motor Company is discussing new ways to recapitalize the firm and raise additional capital Its current capital structure has a 25% weight in equity, 10% in preferred stock, and 65% in debt. The cost of equity capital is 14%, the cost of preferred stock is 8%, and the pretax cost of debt is 7%. What is the weighted average cost of capital for Ford if its marginal tax rate is 35%? A. 7.26% B. 6.89% C. 7.98% D. 8.35%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter17: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 3P

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Assume Ford Motor Company is discussing new ways to recapitalize the firm and raise additional capital. Its current capital structure has a 10% weight in equity, 25% in preferred stock, and 65% in debt. The cost of equity capital is 15%, the cost of preferred stock is 9%, and the pretax cost of debt is 7%. What is the weighted average cost of capital for Ford if its marginal tax rate is 25%? OA. 7.56% OB. 7.2% OC. 7.92% OD. 6.84%
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